Investors Behavioral Biases in Tehran Stock Exchange by Emphasizing the Role of Significant Weaknesses in Internal Control

This study investigates the impact of behavioral biases, specifically herding behavior and mental anchoring, on investor decision-making with a focus on significant weaknesses in internal control. The data from 125 companies listed on the Tehran Stock Exchange during the period 2012 to 2018 were analyzed. The regression models were fitted using the generalized least squares method of panel data in Eviews software version 10. The results of univariate analysis indicate no significant difference in the level of behavioral biases between companies with and without weaknesses in internal control. However, the multivariate analysis reveals that the auditor s report on significant weaknesses in internal control strengthens the collective behavior of investors but has no effect on their mental anchoring. These findings suggest that the behavioral biases of investors are influenced by the priority and significance of market news. In the presence of negative news about a company in the stock market, positive news fails to induce behavioral biases in investors. This study highlights the importance of internal control and its role in shaping investor behavior and decision-making.